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Trends in current account:
A glance at the net invisible account suggests that its ever- rising trend from 2000-01 did not only support the massive trade deficit but also could reduce the current account deficit in 1999-00 and 2000-01. Surprisingly, the continued rise in invisibles led current account to register surplus during 2001- 0212003-04. Deterioration in current account deficit has started from 2004-05 onwards largely on account of burgeoning trade deficit. Although somewhat erratic trend was witnessed in capital account balance during 1990'it maintained upward movement in the new millennium leading to overall balance surplus and voluminous foreign exchange reserves.
In relative terms, merchandise-trade GDP ratio has nearly doubled i.e., from 14.6 peicent in 1990-91 to 28.9 percent in 2004-05. India's share in world exports also spurted to 0.84 percent in 2004 from 0.52 percent in 1990. Invisible receipts1GDP ratio from a low of 2.4 percent in 1990-91 reached 7.7 percent in 2001-02 and further rose to 11.2 percent in 2004-05. Another indicator current receipts as a proportion of current payments rose from 71.5 percent in 1990-91 to 96.4 percent in 2000-01; exceeded 100 percent in 2001-0212003-04 but fell to 95.7 percent in 2004-05.The'most worrisome current account deficit/ GDP ratio which had worsened to 3.1 percent in 1990-91 improved considerably during 1990s and was hardly 0.6 percent in 2000-01. Subsequently, a sustained rise in net invisible surplus turned the current account into surplus rising from 0.7 percent of GDP in 2001-02 to 1.2 percent in 2002-03 percent and 1.7 percent in 2003-04.
However in 2004-05, current account deficit as a proportion of GDP reached 0.9 percent and is likely to maintain the same trend in 2005-06, particularly on account of massive trade deficit. There has been considerable improvement in debt and debt service ratios over the 1990s and India has gained a high degree of credit- worthiness in the world economy. Table 18.2 exhibits invisible items by category of transactions during 2001-21 2004-05. While non-factor services have shown some erratic trend, these nevertheless registered a massive surplus in 2004-05. Exports of software and related services doubled from 2000-01 level to reach $12.8 billion in 2003-04 and a massive $1 7.2 billion in 2004-05. Liberalisation oftravel abroad has put the net receipts from travel in the red in 2004-05. The deficit in investment income is on account of repayments of debt and profits & dividend payments. Not surprisingly, private transfers (NRIs remittances) net balance showing a larger chunk of the net invisibles during all these years. In 2005-06, an estimated $25 billion is expected on this account.
explain and illustrate how the Lm curve is derived.
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y=c+c1(y-t0-t1y,r)+i+g
How can franchises ensure their products are appropriate for international markets?
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